In the public mindset, investing in or making use of the stock market is something that only small-scale, individual investors do. However, it’s also possible for companies and organizations to make the most of it: whether it’s by offering your own firm to other investors through an IPO or using company cash to buy shares in other firms, there are a lot of options.
Initial public offerings
Perhaps the main way that the stock market can be used to a company’s benefit is through a market float, or an initial public offering (IPO). Most American companies are owned by private investors, which means that the general public or wider investor market can’t simply buy shares in the way that they usually can for one on the stock market. An IPO changes that: it means that a company offers some or all of its value for the public to buy, which in turn means a big cash injection.
The key to a successful IPO is research, as it’s only by doing this that a firm can find out the right time to strike. In almost every case, a company will choose to employ a specialist who can manage the IPO process for them – but company staff should still be as aware as possible of market movements. A stock events calendar should be used to locate occasions and dates to be avoided, while keeping a keen eye on news stories about previous IPOs in publications such as the Financial Times will help you build up some perspective on how it works.
Cash investment destination
For businesses that aren’t quite ready to float their value on the stock market just yet, one alternative is to invest any spare cash they have in the stock market. It’s not just retail or individual investors who invest in stocks and shares – companies can also do it. Beware of any tax implications of doing this, though: speak to your retained accountant first before making any moves.
Perhaps one of the most obvious ways that a company can invest in the stock market is through its pension funds. When employees pay into a pension pot, it needs to be invested somewhere in order to grow – and the stock market is one option. Whatever your reason for investing company cash in the stock market, though, you should always seek professional advice to mitigate the risk of losses – and when it comes to using employee pension cash, you should only do it through a pensions professional who can manage it all for you.
While it may seem at first glance like investing in the stock market is simply something that only retail investors do, firms can also use this asset class to their advantage. Whether your firm puts its cash to work by buying shares in other companies for speculative purposes or it goes as far as adding its own value to the stock market for general sale, there are plenty of ways you can go.